Meet J2’s Vivek Shah, the CEO quietly presiding over a $4 billion media business

You probably haven’t heard of Vivek Shah or the company he runs, J2 Global — but you have heard of some of the companies in J2’s portfolio. Shah says he subscribes to the Charlie Munger axiom: “Buy fair businesses at great prices, or great businesses at fair prices.”

“Over the last 10 years, we have spent $2.2 billion as a company acquiring companies,” he said on the latest episode of Recode Media with Peter Kafka. “I think since our inception, which is about two decades ago, we’ve acquired 170 companies. It is core to what we do. So if we’re entering into an environment that is a buyer’s market, that’s fantastic for us.”

In other words: Times are tough for much of the media business, but that’s sort of good news for a serial acquirer like J2. Shah disclaimed, “I’d much prefer to be buying healthy businesses at better value,” but explained how J2’s approach was able to rescue sinking media brands like Mashable, which was losing $16 million annually when it sold itself in 2018; one year later, it is a “solidly profitable, probably mid-single-digit millions business for us.”

However, turning that ship around meant shrinking the workforce and undoing many of the decisions the company had made when it was raising venture capital and trying to expand into new verticals like video production.

“There was a profitable business that was inside of an unprofitable company,” Shah said. “And so if you can reverse the decisions that made it unprofitable and get back to the profitable core, you’re already in a good place. And so that’s what we did.

“They’re difficult decisions but they’re the right business decisions, to narrow the workforce to focus on the core business,” he added. “And so, yeah, you’re almost shrinking to grow the business. But the alternative is a situation like Mic, when the business goes away entirely, which would be a shame. A brand like Mashable should not have gone away, and thankfully it did not go away.”

You can listen to Recode Media wherever you get your podcasts — including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts, and Overcast.

Below, we’ve shared a lightly edited full transcript of Peter’s conversation with Randall.

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Peter Kafka: This is Recode Media with Peter Kafka. That is me. I’m part of the Vox Media Podcast Network. I’m here in New York City at Vox Media headquarters. I’m here with Vivek Shah. Did I get your name right?

Vivek Shah: You did. Well done.

Yay me. CEO of J2 Global, a company you probably have not heard of.

I’ve heard of it.

You’ve heard of it. Formally CEO of Ziff Davis Media company, a company you may have heard of, may be confusing with other people.

Vivek is someone that I wanted to bring on for a while because he’s doing something sort of counter to a lot of other media companies. He’s been in the news on and off the last couple years because he was gonna buy Gawker Media at one point, did buy Mashable. I’m assuming maybe you’re in the market for other distressed assets.

We’re always in the market.

We can talk about that. Let’s set the stage. Explain what J2 Global is, briefly.

So J2 is a $4 billion publicly traded internet information and services company. So to your point, maybe not everyone in your audience has heard of J2, but you’ve probably heard of the 40, one of the 40, or multiple of the 40-plus brands that we own. So we own IGN, we own Mashable, we own PC mag, we own Speedtest, we own Everyday Health.

I wanna have a whole conversation about Speedtest in a little bit.

It’s a great business.

We’ll go on in a second.

Yeah, so we own basically 40 brands. They’re either ad-supported content or subscription-supported services.

Right. And you just used to run the digital media portion of the thing, and now you run the entire whole megillah.

Yeah, so the whole megillah is about $1.2 billion of revenue. Half of that revenue are subscription-supported internet services. Things like eVoice, Campaigner, Viper, which is antivirus, and then the other half is digital media. Which is Ziff Davis and Everyday Health.

And the connection between the digital media side of the company and the rest of the company is what? Other than they’re all ...

It’s all internet. That’s the way I look at it.

Is the idea that Mashable is supposed to feed Viper in some way or no?

Not necessarily.

They’re supposed to be independent?

Think of us as a portfolio company. And we love the diversification that a portfolio brings. So that diversification is business model, ad versus subscription, it’s content versus services, it’s a vertical stack, health, etc. So from our point of view, they’re connected by the internet thread. And there’s another connection which is these are all businesses that are playing some role in the analog-to-digital transition.

And prior to all this, you were at Time Inc running a bunch of their brands…

15 years.

… rising star, went to run Ziff Davis. You can Google Ziff Davis, at one point a giant magazine publisher, eventually bankrupt, out of bankruptcy, is now a publisher of a smaller portfolio of assets that you own.

Yes.

I think of you as a guy who for the last three, four, five years, pretty much to anyone who would ask would say, “Most of you guys are doing it wrong, most of the media businesses is going in the wrong direction. You’re raising too much money, you’re pursuing this advertising-based/Facebook/Google-based strategy. It’s not gonna work.” You can do a victory lap now if you want, ‘cause it kind of sounds like you had it right all along.

I mean, look, I think from a digital media point of view, we understand pretty early on that display-only — and by display I mean ad banners and pre-roll ads — alone wasn’t going to work. Right? So recognizing that we needed multiple revenue streams, which when you go back to my Time Inc days, when you go back to your magazine days, we’ve always had multiple revenue streams.

Consumer pays for a subscription, there’s advertising, there’s other stuff.

Exactly. So we understood that, right, and so when you look at what we’ve done on the media side, more than half of our revenues are not display advertising. So it’s either performance marketing, which we can talk more about, but it’s basically driving transactions and driving leads. So yes, a form of advertising, but different. Not RFP-based, not request-for-proposal-based, not ad-served-based, but really driving transactions.

You’re not getting paid for showing someone an ad, you’re getting paid when someone does something.

We do. So, to be clear, we do have a display advertising business, and it’s a substantial one. It’s $250 million a year. But we have north of that in performance marketing and subscriptions.

So, back to your original point, yes, I think we saw that display-only wouldn’t work. I think the other thing that probably distinguishes us from some, not all, digital media companies is we are very earnings and cash-flow focused. So we run the business in sort of a really traditional way, right? It just happens to be a digital media business, but from our point of view, we’re here to generate cash.

Is that just simply a function that you’re publicly traded and you have to show that?

No, I think it’s our mindset. And I think, you know, going back to my Time Inc days, what maybe not everyone associates with Time Inc, but I do, a very disciplined company. It ran a very sound business. So the 15 years I spent there really trained me to run a media business like a business.

Right. And it was in decline for a lot of that time and it had the same internet problem that everyone else had. But you guys were making money year after year after year. And all the folks that were there, I’m assuming that includes you, said, “Man, the problem is that we had to take all our profits and hand them over to Time Warner, and we could never do anything else.”

Yeah. Look, so I think the one thing that if we could’ve done differently, I think, is to take the cash that we were generating from our operations and invest it back into the business, either in the form of investments in the business, operating investments, more capital investments, or acquisitions. And so I won’t go through the acquisitions that ...

The could’ve, would’ve, should’ve.

Well, we had a list that if we had transacted on any of those, I think, would’ve fundamentally changed that company.

And so when I moved into Ziff Davis, so I spent 15 years at Time Inc, when I moved into Ziff Davis, just understand what Ziff Davis was. Ziff Davis had just come out of bankruptcy, had one brand, that was PC mag, doing $16 million of revenue, losing some millions that we acquired for about $22.5 million. So I didn’t start with necessarily the most success.

Successful portfolio.

Yes. But what we understood was that there was a path for that brand, that if we could take the cash we were gonna generate from that brand and acquire other brands, which we started to do, that we could start to build something interesting. And really, it’s from that early kernel, which was 2010 to today, we have a $600 million media business.

So we understood the role that acquisitions could play in building a modern digital media company, too. So that’s an important part in, I think, the distinction.

So let’s explain what performance marketing is. I think broadly this is what people call e-commerce now.

It’s a combination of ...

At least when they’re talking about media companies.

Yeah. So it’s a combination, for us, it’s affiliate e-commerce. So links on articles that drive your users to a commerce site to transact.

And you get paid either when you send someone, when someone clicks on the link, or when they go there and then maybe buy or in some way transact on the other side.

Correct. So turning consumers of content into consumers of products and services, it’s something that I think a lot of businesses now are doing.

The last couple years, a lot of ... Vox Media has a little group dedicated to this. BuzzFeed does, the New York Times went out and bought Wirecutter, and that is the core of that business, is you go ask them, “What kind of refrigerator should I buy?” They tell you, “Go buy this one,” and you end up at Best Buy and maybe Wirecutter gets a cut of that deal.

So we saw that eight years ago, and that’s a $250 million a year business for us. And think about the margin profile, that’s very high, right? Because I’ve already spent my cost on editorial, infrastructure, etc. It also is different than your traditional ad business, where someone says, “I’m gonna buy a certain amount,” and then you fulfill it. Here, it’s uncapped. “As long as you drive a transaction, I’ll pay you.” And we love that characteristic for the business.

So yes, it’s more competitive, more people are focused on it, but I think that’s a positive. Because I’ll tell you, when we started in affiliate commerce, most affiliate publishers weren’t the highest-quality editorial publishers. Now you look at the affiliate commerce industry and you’ve got a number ...

New York Times on down, right?

Yeah. You’ve got New York Times, you’ve got the properties inside of this building at Vox, you’ve got quality properties.

New York magazine is really pushing this.

Yeah. So, that’s good. So, that is performance marketing.

Another element that we have that some of these companies also have, or may not have, is lead gen. Where there is certain products and services, particularly in the enterprise where you’re not gonna transact online. Where we’re helping collect lead forms that turn into something a salesperson can follow up on.

Again, and a very old model and it’s been around as long as the internet’s been around.

A great B2B model.

Right.

Yeah.

And sort of waxes and wanes, I think, depending on sort of like, there’s a lot of credit card stuff and mortgage stuff that comes back and forth. But for things, high considerations products, right?

Correct.

That’s the correct term for it. Where someone, if they loop you in as a customer, they’re gonna make an enormous amount of money so they can pay you a significant chunk of money for that lead.

That’s right. Their allowable is high.

So given that that’s the core of your business, or the main thrust of your business, when you’re looking at things you want to buy or maybe even build, I’m assuming that that means that anything you’re looking at has to work in that model?

So, again, not everything. So let’s go the J2 portfolio for a second. I think if you are ... affiliate commerce and performance marketing is one play in our playbook, subscriptions is another play. But let’s focus on performance marketing since we’re talking about it and we can get into subscriptions.

Take Mashable. We had looked to acquire Mashable some years ago. I love the brand, I reached out to Pete Cashmore, the founder, great guy.

This, too, was just last year?

So we bought it last year.

2018?

Yeah. But some years ago, I had approached the company about buying. And Pete, at the time, chose to raise capital, and he did. And he raised a fair amount of capital.

And this is a property, just to go way back, that started off as a MySpace enthusiast blog that Pete started when he was like 12 or something. And he’s telling you like how to mod your MySpace page, then became this like fantastically sort of successful, nerdy, tech-specific site. And then over time, intentionally tried to get much bigger and much broader.

And that was the challenge, right? I think when we were having our original conversations, and it was a tech- and digital-oriented publisher, it was a profitable business, it was a great business. I think once they raised capital, it changed their ambition. And so they went beyond that focus editorially, but more importantly, they went into a studio business, and they went into a business called Velocity, which was a software business. And I think ...

So studio business meaning ...

Video content.

“We’re gonna make stuff.”

Yes. For social platforms, for the checkbooks that have been out to buy content.

“Maybe Netflix will buy a show from us.”

Correct. And so, look, I think what ended up happening, it went from a money-making business to a money-losing business. And then over time, all of those losses ate into the venture cash that was on the balance sheet and they ran out of money. And so we look at it and say, “Okay, but wait a minute. If you go back in time and if you reverse those decisions, there was a good, nice, core profitable business.” And inside of our portfolio, that’s fantastic.

So when you’re looking at a Mashable, you say, “All right, it’s a business with however many pageviews.” Are you interested in the entirety of the business or do you go, “All we care about is a specific part of that business because that’s what we can attach affiliate ads to”?

Well, in that case, before you even got into adding affiliate revenue to it, was there a profitable core? And the answer is, yes. I mean, there was a profitable business that was inside of an unprofitable company. And so if you can reverse the decisions that made it unprofitable and get back to the profitable core, you’re already in a good place. And so that’s what we did.

Now, you layer in a new revenue stream, in this case affiliate commerce, and you’re in a great position. So fast-forward a year now, I think when we acquired Mashable their annual losses were in excess of $16 million a year. They are now a solidly profitable, probably mid-single-digit millions business for us.

I’m assuming you had to shrink that staff in order to get to that number?

Yeah. You look for … When I talk about reversing decisions, you do that one of two ways. You can try to sell pieces of the business off that you don’t feel are core. In this instance, they weren’t really saleable assets. Or you make the decision, they’re difficult decisions but they’re the right business decisions, to narrow the workforce to focus on the core business. And so, yeah, you’re almost shrinking to grow the business. But the alternative is a situation like Mic, when the business goes away entirely, which would be a shame. A brand like Mashable should not have gone away, and thankfully it did not go away.

Did you guys look at Mic?

We didn’t.

No. So why look at a Mashable but not a Mic, if from a very, very 10,000-foot perspective they seem like similar... They’re publishing on the internet, they’re targeting younger people.

Two differences. One is, Mashable established a profitable business. Right? So in its history, as I said ...

It has been profitable in the past.

It was profitable. And then decided to expand with venture money into areas that made it unprofitable.

And you can reverse that?

Yes. So that’s a key difference.

The second is if you’re going to participate in affiliate commerce, you need a brand that has some authority over helping inform some buying decisions. Mashable has that. So when Mashable talks about the best VPN, or the best headphones, or the best laptops, you’ll pay attention. So you need a brand that can be attached to that kind of content if you’re going to be in the affiliate commerce business.

So authority in a thing that also has affiliate commerce attached to it?

Service journalism.

Right.

What we would call service journalism when we were in our magazine days.

I want to know what kind of headphones to buy.

Totally.

I’ll go to Google, I’m going to get a list of 10 results. One might be Wirecutter, one might be Mashable, one might be The Verge. You can make money by attaching ads to those recommendations.

Correct. Correct.

So you also looked ... famously made a bid for Gawker Media when they were in bankruptcy.

We were the stalking horse.

You were the stalking horse. Didn’t end up picking it up, went to Univision. That’s a whole other story now. But what was the plan, had you had won that bid?

Gizmo and Lifehacker. Two great brands.

Tech site and sort of generalized how to get things done site.

Yeah. So they were, I think, a perfect fit within our portfolio, within our tech media portfolio. They had already started down the affiliate commerce path with something called Kinja which was really more a commerce content management system.

God bless you if you could explain that. Nick Denton tried for 10 years, I never understood it.

I think it was just basically technology to inform affiliated commerce.

Okay.

They went down a path we understood. We thought we could accelerate that path, and so we were optimistic about our abilities with those properties. I think the rest of the properties were less of a fit for us, and we would have thought of ways possibly to figure alternatives out for those. But we were motivated ...

Maybe sell them off or ...

Ah, maybe, yeah. Yeah. And we’ve done that. We sold three businesses last year at J2, so we’re not averse to that, it’s got to fit within the portfolio. But we really liked those two brands and we liked the price that we were in at. I think if I’m not mistaken, we were at $90 million at that time.

So it is, you would have bought the entire portfolio, I think minus gawker.com, and you would’ve been very interested in two of those properties and figured out what to do with the rest of them.

People forget this, but Gizmodo was the original property.

For Gawker?

Yeah.

Yeah, yeah, yeah.

Gawker came after Gizmodo.

Right. When you buy an asset like a Mashable, or when you look at buying an asset like a Gawker Media, and they have a different culture than the J2/Ziff Davis culture, how do you think about how you’re going to figure out that transition and how you’re going to keep the people you want to keep from the company you’re buying?

Look, I think it comes down to people want to be a position where they can succeed, where they can win, where we can invest, where we can be on offense, we can acquire. I think that’s one of the things that’s been very compelling to a lot of the people we’ve acquired into the company and have stayed with us is they’re able to leverage our balance sheet, our cash, to go and do more and build larger businesses.

So that sounds very rational, right? But when you’re talking, especially when you’re talking about media, right, a lot of us are delicate flowers. And we think that our work is very important and advocates of the First Amendment, etc., and you go to somewhere like Ziff Davis, Ziff Davis specifically: “We have a model, we are going to make money when people come to our site, they click on a link, and it’s a good business, can be a very good business. It may not be sexy, it may not be interesting to someone at a cocktail party, it may not get covered in one of the umpteen media blogs.” Do you have to sort of go to people and say, “This is the new reality”? Or can you soften that blow for them?

Yeah, but I don’t think, and I’m not asking them to think entirely about J2, I’m asking them to think about their brands. So if you work at IGN … we acquired IGN, it was not a successful business, it had been a successful business and we returned it to its prior glory. So everyone who works at IGN feels like, “I work at a great brand.”

We did the same with PCMag. PCMag was bankrupt. Now the team there — and a lot of those folks had been there for a while — feel fantastic because they’re part of a winning brand. I think the same is happening now at Mashable, where you’ve got members of the team who feel really good about the fact that this is a successful, profitable business that isn’t going anywhere.

It’s very hard to imagine this one working with the Gawker folks, especially when you see sort of what happened at Univision where they were theoretically more aligned. You know, cut to a year later, the folks at Gawker/Gizmodo are writing really savage pieces about how inept their owners are.

Yeah.

I can’t image that culture working with your culture.

Yeah, look. I think that if they perform and deliver results, we’re satisfied. I mean, you know me enough that, you know we’re not trying to impose some overarching corporate will. One of the things that I think we’ve done really well at J2 is let each of the brands determine their own paths with certain understanding around requirements, around results, etc. And there’s discipline, but in the end there’s a self-determination that goes on.

You do your job, and then after you’ve done your job, or as long as you’ve done your job, you can fly your freak flag.

Yeah! I think that’s absolutely right. And look I know editorial cultures, right? I mean, I spent 15 years at Time Inc. and so we understand that, fundamentally, they want to be in a position to do what they’re here to do. And if I can create an environment that allows these editorial folks to write, produce video, audio, whatever it is, in the way they want, they feel good about that.

Versus, I don’t think people within our portfolio are worried about whether or not we’re going to make payroll. Or whether or not we’re going to be around in three months. And if you look in the digital media landscape, there’re a lot of people worried about whether or not their company’s going to make payroll.

Last year was rough. Seems like this year’s going to be rough. I mean, if you were — I don’t think you need a genius to figure this out — if you were worried about where your money was going to come from last year, that might be even more acute this year.

One, what does that mean for your business, the existing business you guys have? I was looking at your last Q3, it looks like you were down a little bit on the media side?

No, no.

Overall up for the year, but I think the Q3 was down year over year.

No, no. No, no. We’re up. Solid.

Did I misread it?

Yeah, I think so.

Top line? Correct?

Absolutely.

I’ll blame it on my phone.

Yeah, no, so we ... Look, fundamentally, we acquire businesses. The J2 acquisition system is core to what we do. So if we are entering into a market where we see some sort of deflation in prices, that’ll be good for us.

So just to give you an order of magnitude, over the last 10 years, we have spent $2.2 billion as a company acquiring companies. I think since our inception, which is about two decades ago, we’ve acquired 170 companies. It is core to what we do. So if we’re entering into an environment that is a buyer’s market, that’s fantastic for us.

I’m assuming that there is going to be a lot of stuff out there, I’m sure a lot of stuff comes to you already?

Mm-hmm.

I think we kind of covered this, but just lay it out. What are the things that you most want to buy and what are the things that you want to take a pass on? I’m assuming there are some things where they’re in the middle. Where like, “I don’t want to pay this for it, but if it’s offered at basically no price, I’ll take it.”

Yeah, so we have an expression we use that we sort of paraphrase from Berkshire Hathaway which is, we buy fair businesses at great prices, or great businesses at fair prices. And so what does that mean? That means that there are businesses that, you know, where the value is there, where we see an opportunity to change something to create value, whether that’s the shrink to grow that we had talked about, whether that’s introducing a new revenue stream.

And then there are businesses that are just fantastic businesses that we can throw fuel on the fire. And whether that’s, we can help them with marketing, whether that’s we can help them with cross-sell, whether that’s we can provide capital for them to pursue their ambitions, we’ll look for those businesses too.

And so a business like that is Ookla or Humble Bundle or offers.com. These are businesses that were fast-growing businesses when we bought them, and all we have done is make them better. Which is different than maybe some of the other properties that we were talking about where it was more of a turnaround situation.

So we’ll look across the landscape for opportunities, and ultimately the price that we pay is a function of where that business sits.

Like if you talk to the folks at NBC, at Comcast, who up until a couple of years ago were putting a lot of money into properties like this one, Vox Media, BuzzFeed, they bought a bunch of shares in Snap. Now what they’ll say is, “We’re not very interested in companies that are dependent primarily on advertising. We’re not very interested in companies that are Facebook-dependent, Google-dependent.” Are you in that same boat, or is there a world where some of those things make sense for you?

Look, it’s case by case, right? So I think ...

What they say is, “We really like commerce businesses. We like businesses where consumers pay money for something and we can partake in that.”

Yeah. Look, I think ultimately, we look at every acquisition opportunity with one central question, which is, “Can we create value?” And there are multiple ways in which we’ve created value. So it’s hard for me to sort of say anything definitively like, “We will never do this,” and, “We will always do this.” It’s case by case. And it should be, right? And so what we’re very good at is identifying, evaluating, diligencing, transacting, integrating acquisitions where we feel that we can create value such that ... it’s got to be this, whereby owning the business we have made it better. That we uniquely can make it better.

I assume there are two kinds of things coming across your desk. One is a Mic or a Mashable where, “We are out of money, we are going to have to close the door in X number of days.”

Yeah. Fair business is a great process.

Like, “If someone doesn’t buy us, we’re going away.” And I’m assuming there’s another bucket of people who say, “We have a business, we can keep operating the business. It’s just not what we thought it was going to be and/or our investors want out.” Are those harder to make happen because you’re trying to please different constituencies versus one thing is a fire sale and a dollar is a dollar?

No, I mean again, look, I think transacting in general has never been easy. A lot of things have to line up. We tend to be very good at it because I think we very quickly come to a point of view and can move decisively and with integrity. You know, we have a good reputation when we transact that we behave the way we say we’re going to behave, so there’s no re-trading, there’s no sort of eleventh hour renegotiations. That’s not who we are. Because transactions are core to what we do so maintaining our reputation in the M&A marketplace is critical.

So no, again, I think that in the third category of businesses, which really, these are great, fundamental businesses. They don’t need to sell, but they recognize that if they can get access to our balance sheet, maybe they can go do something interesting. So let’s talk about Ookla because we talked about it earlier.

Speedtest.

Speedtest.

If you’ve Googled “speed test” because your internet doesn’t work as fast as you think it should, maybe you even downloaded the app because you’re a nerd like myself, you get that little ...

Yep. The gauge.

The gauge. You hit it and it tells you your internet is slow.

Correct.

I assumed that you made money by showing me a banner ad there. You’ve told me I’m wrong.

So let’s step back and talk about the size of Ookla. So Ookla has 360 million installs of its app, all organic, on various, mostly phones. So that’s an extraordinary statement.

So people like me who put it on my phone.

Correct. So it’s more than just a narrow universe of people.

But I figured I was a really, really narrow slice of nerd-dom.

No.

Because most people just go “My internet doesn’t work,” and then they throw their phone.

No. So, 360 million installs of the app. So when we looked at acquiring the company, you’re right. It fundamentally ran programmatic ads, so ads it didn’t sell, that Google placed within the websites, speedtest.net, or within the app.

That’s a business.

That’s a business. And it was growing because the usage and the traffic was growing. And we looked at it. And we came to understand it because we were working with them on some editorial content. “Oh, tell us the fastest ISPs, tell us the fastest mobile network.” So we knew it. And I said, “That’s an interesting business.”

And so as we got to know them, we said, “Look, what are you doing with all of this information that you’re sitting on? This incredible view into broadband and into networks and into experiences?”

So just to be clear, right, so me being frustrated with my internet speed, either at work or at home, is somewhat, it’s interesting to a point to me, but if you multiply me times 300 million people and you know what my internet, what all those internet speeds are in lots of different places, you know where they are, that becomes valuable why?

I think the aggregated view, not the individual view, the aggregated view into the quality and performance of networks and whether that’s Verizon’s network or Comcast’s network or Sprint’s network or Vodaphone’s network, that’s interesting to those sellers of broadband and it allows them to understand where they’re weak and where they’re competitively disadvantaged. And so it actually helps all of us. What it does is it’s kind of a rising tide lifting all boats where we’re helping these networks understand where they need to do better.

So you buy that, you have that information, you’re selling it to the Verizons of the world?

We sell it as a subscription product, the data-as-a-service product. They get a real-time view into the state of their networks versus their competitive set in territories, by devices, by operating system, by time of day, there are a lot of variables that go into the experience you have as a customer with the idea that it could inform their spectrum bidding. When they go into those auctions to bid on spectrum, it can inform their network investments. It can form a lot of things about the very product that they’re selling. That’s valuable.

So, when we looked at Ookla, we said, “Okay, back to where we started.” Great business, great natural growth rate, great usage, selling advertising programmatically, and now there’s this other part of the business that we can layer into it. So, Ookla, as sellers to us, liked the vision, had some concerns about investing to build the infrastructure.

It was a standalone company.

Correct. We were building a business intelligence software platform. That’s not what they did. That takes capital. That’s where coming into J2, we don’t think twice. That is a good capital investment. Then they had a list of companies — Downdetector, Mosaic, Ekahau — companies you may not have heard of.

Never heard.

All that are in this world of broadband intelligence that we have now acquired for Ookla, that are part of the Ookla business unit. So back to why doesn’t Ookla get interested in J2? They would not have made the investments, I think, in the Speedtest intelligence product. That’s what it’s called, the data service, and they certainly wouldn’t have gone out and acquired the businesses that we’ve acquired for them. And that allows them to build something really special.

In an era where people are — particularly now, at least, the press is particularly interested in privacy, I’m sure I’ve clicked the button that says, “Sure, this is okay.” I’m sure I also have not thought of why ... because I’ve talked to you about it. But I’m sure the 99.99 percent of people who are doing this are not considering that their data has gone up somewhere and is being resold. And it’s aggregated. It’s not personalized. Are you concerned at all in an era with GDPR and just an increase in privacy that a product like that takes information and sort of resells it is vulnerable in some way?

Well look, I think No. 1, if you see the disclosure that we have, it’s very strong, it’s very apparent. It’s not hidden and it’s very clear what we’re doing.

I guarantee you that we could walk around and find however many people have downloaded that app around here and none of them have any idea what they’ve signed on for. Even though they’ve clicked yes and they’re intelligent people.

No, but look, I think ... So as far as how you would compare our disclosures versus others, it’s as good as it gets. Now, you may argue that no one ever looks at these things.

Exactly.

That I ... I can’t solve human nature. But what are we doing? We’re providing data to make your experience better. I’m not targeting ads. We get a lot of inquiries into our data for ad targeting, for location data. We don’t do that. We don’t sell that. So our data business is not what you hear about with a lot of other companies, where they’re essentially selling your information so that someone can target an ad against you. That’s not what we’re doing.

Are there other Ooklas out there? So that’s the only one you’re going to buy in that category, but things where you can take, it may be consumer behavior, and figure out a different way of monetizing it than you’ve traditionally done.

It’s a great question.

Thank you!

It is. When we start to think about the different models we like, how do you find properties on the internet that have an engaged audience where the exhaust of what they do is a body of information that a company would find very valuable. Not for ad targeting, but to run their business.

The exhaust meaning the data that’s sort of kicked up in the transaction.

Yes. And that’s an interesting perspective, right? Fundamentally, we have audiences. We’re trying to extract rent from these audiences. Historically, the main rent was an ad, but there are possible ...

Attention, right? You give me your attention, I put an ad in front of it. That’s the transaction and you get that whether you’ve thought it through or whether it’s just the way you’ve always looked at stuff.

That’s right. But can that audience, by virtue of what they’re doing, inform business intelligence? That’s one product. And then the other piece of this — which is a good segue to our Humble Bundle transaction — is can we sell a subscription service to our audiences that is not “put a paywall in front of the thing you were getting for free?”

I’ve never heard of Humble Bundle until I was looking at your Q3 this morning, which apparently I misread anyway. Tell me what it is.

It is a fantastic business. So it is a subscription service where you get access to a trove of games, video games, and every month we give you a handful of new games. And so you pay this one fee, think of it almost like a subscription video on-demand, but for gaming.

There was, GameFly was a version of this. There’s been subscription gaming services before.

There have been, but this one is done pretty well. And I think the reason it’s done pretty well is that they’ve got a great perspective on which games to include each month. We also finance our own games. So we have proprietary games that are Humble games that come into our service.

So it’s a little bit like when you start to think of like a Netflix, you start with licensed content and then you start to move into original content. We’ve sort of done a very similar thing. But the important thing is, it’s a great business on its own. They’ve done a fantastic job, but we have IGN, which has the largest audience of gamers worldwide.

So instead of saying, as many publishers have done, “How do we charge our users for something they’re already getting?” which is the content at IGN, we’re not doing that. We’re saying, “How do we leverage this audience?”

This is, a lot of folks come in here saying, “We’re putting up a paywall.”

Yes.

Or “we’re not going to call it a paywall, we’re going to call it an affinity group, and we’re going to give you extra stuff if you pay us.”

No. What we’re saying is we have this service over here and we’re going to market it. So when you look at most subscription businesses, the No. 1 expense is marketing. Acquiring subscribers. That is the No. 1 expense you will see in most subscription businesses.

And you’re doing the math, “How much am I paying to acquire this customer?” versus “How long are they going to stick around?”

Cost to acquire a customer versus the lifetime value, right?

Yep.

Right, that is the CAC versus LTV equation, is the formula of subscription businesses. What happens when your CAC goes down, though, because you’re an owner of audiences? And that’s our other epiphany. So when we think about our media businesses, we think about what subscription services can we build or acquire that are of interest to our markets and to our audiences so that we can have a really attractive CAC-LTV equation?

So that is different. When a lot of media companies talk about, “We’re going for subscriptions,” they’re really talking about trying to get their users to pay for something that has historically been free.

Tough.

That’s hard.

Yeah. Getting paid for something that was free a month ago.

Correct.

On this very site. It’s not just information, it’s the information you used to get for free, we’re now going to charge you. Please pay.

That’s hard. But doing what we’re doing with IGN and Humble Bundle is attractive. So that is another model where we think about what other subscription services are out there, that somebody else has invented, that when plugged into our reach ...

Someone would normally have to pay IGN to advertise that business.

Correct.

You guys own the business, you’re saving money.

Precisely.

I just want to go back to a thing we talked about at the beginning of this conversation. We had David Carey here a year ago, he was running Hearst at the time, saying, “All these digital media businesses ... It’s easy to lose money in a digital media business. And I’m going to buy you and all your Aeron chairs, collectively.” He’s partially right. Do you think that rate of failure/consolidation is going to accelerate this year?

Let me start by saying I don’t want anyone to fail, so we don’t root for people to fail.

That said...

Look, I think that fundamentally, I’d much prefer to be buying healthy businesses at better value.

You don’t want to be known as a distressed asset buyer?

I just want to be viewed as a creator of value in the acquisitions that we do. We want to create value, okay? And we want to create value that is in excess of what anyone else could do with the asset. I can tell you that, in the end, when you can get a fundamentally healthy business at an attractive price, that’s the most optimal equation, so that’s what we’d rather have.

So are you rubbing your hands together saying, “All right, this is the time to buy”?

Again, we buy all the time. So from my point of view, every market, up market, down market, flat market, we’re acquirers. Again, if you look at J2’s history, if you look at the digital media portion of J2, the non-digital media portion of J2, we transact. That’s what we do.

So whether the market is a good market or a bad market, we’re going to find opportunities. That’s what we’re good at. So I don’t sit here and think too much about things I’m not going to be able to control, which is the marketplace. In the end, again, I’m simply saying my preference is I’d rather have quality businesses that we can get at reasonable prices.

What’s life like for you running a public company that, again, most people — and I think this includes Wall Street – haven’t heard of? At Time Inc you were a rising star, I probably heard/saw your name more often, you were probably on more panels.

Yep.

I think you’re relatively anonymous right now is one of the reasons I decided to have you here. How important is it for you, an increased profile, either for yourself or for the company?

If it’s of benefit to our shareholders, then it’s important, right? And so I think the way I’ve approached myself in this last year as the CEO of J2 — and it’s only been one year — is to very much just focus on results, focus on getting to know our shareholder base and our analyst universe. And I’ve known them, but not certainly in this seat, so that’s been super important.

I think what we want to make sure of, are those who invest in public companies who would consider buying a share of JCOM, which is our ticker symbol, that the information Is out there for them to make an informed choice. That’s important.

But there is some sales in this, right? You do need to sort of raise ... I mean, human beings are human beings, right? And if they haven’t heard of the company and you need to start explaining to them what the company is, that is a harder sell than if they, “I know what Time Warner ...”

I think building awareness of the company amongst those stakeholders is important, so I wouldn’t dispute that. Getting personal recognition and seeing my name out there doesn’t ...

Look, you’re on the Recode Media podcast, come on. How good is that?

Well, because I like you, Peter.

Thank you. Now this is going to ... You’re going to zip right up to the top of most-admired CEOs.

Of course. Of course. No, but listen, again there are plenty of great companies that produce terrific shareholder returns, that like us are very much focused on results and less focused on press and less focused on bringing attention to ourselves. If you look in the media industry, there seems to be a correlation between the things that have most buzz and working least seem to be highly correlated.

I’m nodding, quietly.

So I don’t know. You know, I don’t think we need to overthink it, but to your point, look, you’re right. We’re probably ... I’ve said this, we are the largest internet company that many people have never heard of. I mean at $4 billion of enterprise value, that’s a public number. That’s not a made-up number, it’s a real number.

We get repriced every second of every day as a public company. Yeah, there should be more awareness of what we’re doing and how we’re doing it. But I will tell you that I think those in the media industry and the internet business, even in the public markets, I think awareness in increasing.

All right. I think you are going to see your awareness increase after this podcast.

I hope so.

So I’m glad I was able to help. Vivek, thanks for coming on.

Great to be here.

Appreciate it.

Thank you.

This article originally appeared on Recode.net.